Alaska Air Group is receiving some financial relief from Boeing after a rough patch earlier this year. The airline was impacted by the grounding of Boeing's 737 MAX 9 jets, which stemmed from a mid-air incident involving an Alaska Air-operated plane in January. This grounding, which lasted about three weeks, caused significant disruption to Alaska Air's operations. To compensate for the financial losses incurred during the grounding, Boeing previously provided Alaska Air with $162 million in cash. Now, the planemaker has taken an additional step by issuing $61 million in supplier credit memos to the airline. These credit memos essentially function as vouchers that Alaska Air can use for future purchases from Boeing.
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The grounding of the 737 MAX 9 wasn't just an inconvenience for Alaska Air; it was a financial blow. The airline had to cancel flights, re-accommodate passengers, and deal with the overall disruption to their schedule. While the initial cash compensation from Boeing helped offset some of these costs, the additional credit memo provides further financial support. This move by Boeing highlights the ripple effects of problems within the aviation industry.
When an aircraft model experiences grounding due to safety concerns, airlines that rely on that model are significantly impacted. Boeing's compensation package acknowledges this impact and aims to lessen the financial burden on Alaska Air. It's important to note that the use of supplier credit memos has its limitations. While they provide Alaska Air with some financial flexibility, they don't directly translate to cash.
The airline can only utilize these credits towards future purchases from Boeing, potentially limiting their spending options. However, the credit memo does represent a good-faith effort by Boeing to address the financial losses suffered by Alaska Air. This additional compensation, coupled with the initial cash payment, helps to strengthen the relationship between the airline and the aircraft manufacturer.